About this Show

Mad Money

News/Business. (2013)

NETWORK

DURATION
01:00:00

RATING

SCANNED IN
San Francisco, CA, USA

SOURCE
Comcast Cable

TUNER
Virtual Ch. 58 (CNBC)

VIDEO CODEC
mpeg2video

AUDIO CODEC
ac3

PIXEL WIDTH
528

PIXEL HEIGHT
480

TOPIC FREQUENCY

Cramer 9, Hoveround 8, Jim Cramer 5, Goldman Sachs 4, New York 3, Bob Evans 3, Kimberly Clark 3, Hoveround America Travel Mug 2, Goldman 2, Us 2, Jim 2, Phoenix 2, Marty 2, Upto 1, Alcoa 1, Arizona 1, Loretta 1, Illinois 1, The Oil 1, Bet 1,
Borrow a DVD
of this show
  CNBC    Mad Money    News/Business.  (2013)  

    April 20, 2013
    4:00 - 5:00am EDT  

4:00am
i'm jim cramer and welcome to my world. >> you need to get in the game! firms are going to go out of business and he's nuts, they're nuts! they know nothing! i always like to say, there's a bull market somewhere and i promise -- "mad money," you can't afford to miss it. hey, i'm cramer! welcome to "mad money." welcome to cramerica. other people want to make friends, i'm just trying to make you a little money. my job is not just to entertain you, but to teach and to coach, so call me at 1-800-743-cnbc. there's some things i've been keeping from you. it's not fair. tonight i'm going to do something about it. tonight i'm going to tell you who i am and how i got here. no, not i am jim cramer of "mad
4:01am
money," "squawk on the street" and that avatar comes up many times these days. it did take my years to learn that avatar was not a movie. what i want to do tonight is a special show. remember, in the end, this is cramerica. i'm going to give you the skinny on how i became a good investor, how i can help you become better than i've ever been. that is the ultimate goal of "mad money." my love actually started back in fourth grade. that's right, fourth grade. you see, my dad would bring home the bulletin. at that point, one of the largest newspapers in the country when he returned from
4:02am
work every single night. i wanted it for the comics and the sports. i was a phillies fan. if i could go back into time, the only thing i would change is i would have made it so i was a yankee fan. we were only 89 miles south of new york. i was a curious kid. curiosity has always been a lesson and a curse of mine. anyway, there was always this solid chunk of the paper that seems impenetrable. they were the other table, different from the badding average tables and box scores i would scrutinize with regularity. open, range, close, what open? what range? what close? what are these strange things? why did they matter? i asked my dad. occasionally, i would hear him get mad. >> buy, buy, buy, buy, buy. >> when he heard prices
4:03am
mentioned on the radio. he particularly seemed upset and got very angry when i heard the name national video on the radio and how it went out. i didn't know what national video did or why it went out. i did know -- i don't know if pops knew, either, what it did. i don't know. but i know it made him curious and i wanted to find out more about what these things were. so he sat me down and exchanged that each of those represented a performance of a stock. the rake was how low and how high it traded during the day and the close was how much it was worth when trading finished for the day. it fascinated me. how could there be so many companies ask why in the heck did they trade in ranges. he described to me that people tried very hard to figure out each day which stock went up and they wanted to buy it so they could make money from their increases. it struck me as down right silly. i told him when i was looking at the baseball tables i always
4:04am
tried to figure out who was high, who was down. he said it was pretty much the same with stocks, that some players were doing okay, were were hot as a pistol. i said i wanted to figure out which were going to go higher just like everyone else was trying to figure it out. it seemed to me that the radio was always on. most of the news was about the war, the war in vietnam and it was frightful and scary. even when i was 9 years old, my mom was worried i would have to go to war. right after the news, they always mentioned the dow jones, the stocks that had done the better or the worst. national video was on the worst
4:05am
things, hence the anger. what i did was write the names down that i heard and i tracked them. i kept them in this ledger, this ledger that i still have. how did klm go out? there's mgm, xerox, polaroid. zenith went up a lot. i would go over each one each day and put them down. there's a winner. there's a winner. anyway, so it was a game. i was just trying to figure tout next move of a stock, even if all i really knew was, frankly, the name continental or the name rca. whatever. most of them were defense stocks. they went up a lot in tandem with the war i heard about. so i followed a bunch of those along with the others. after a year, i thought, this was a cool name. i wanted to introduce it to my fifth grade class, so i did. going in and showing them my ledger, inviting everyone to play to see who could find stocks that went up the most the next week. not everyone was as interested
4:06am
as i was. my dad's company, the national giftwrapping box company which later was international packaging represented them corp., then the minnesota mining and manufacturing company. mmm, as we called it, was always innovating, coming up with new product lines, which it still does. right about fifth grade, pop came home with a new line of 3m products that i was selling called the bookshelf games. that's right. they got into what's known asm bookshelf games. he said perhaps i might want to learn more about how the stock market worked and how the company had created two games about business, about acquire, takeovers and stocks and bonds of which i am fortunately enough to have gotten a real honest to god copyright here coursesy of george who gave it to me for the holidays. look at this.. i almost cried when i saw this. i loved the game so much.
4:07am
shady brooks development, i think justin, one of our camera people had that won. subsequently, i asked the ceo of 3m to bring these games back. i don't know if he will. but the point i mention at all is from my own mix of games, the stocks and bonds, is that stocks are fascinating enough. i promise you to get your kids started on them right now. particularly when you have games like stocks & bonds. pick some stocks. maybe not all defense companies, although they're performing in an odd way. but if companies are -- maybe your kids are familiar with. have them track them. get them started early. and you know what? maybe they'll play for life. alas, the stock market is a long-term contest. and one i think the earlier you get in, let's just say, okay, the more you can win.
4:08am
let's go to loretta in arizona, please, loretta. >> hi, captain cramer. a big booyah to you from sunny phoenix, arizona. >> love phoenix. what's up? >> caller: what steps should an investor take when a company they thought was solid was a strong monthly dividend suffers a steep drop in price and a 50% dividend reduction? hold em or fold em? >> well, you know, it depends on the circumstances. a lot of monthly ones are oil related. if oil comes back, then i think you would have sold at the bottom. freeport cut its dividend. but you know what? don't sell it. do some work. it might just be the actual bottom. it can mark the bottom and i think that's what you have to be picky about. john in illinois, john. >> caller: windy city booyah to you, cramer. >> nice. what's up?
4:09am
>> caller: hey, thanks for all you do for us and thanks especially for helping me get my son through colorado state university. >> congratulations to him and i want to thank my staff for helping your son because it's a team effort here to make things great. how can i help? >> here is my question. i got an e-mail from one of my holdings and they said they were going to the a five to one reimburse. now, i know what a reverse is -- is, but my question is, the fact that it's five to one, is that a red flag and should i get out or is that not something to be concerned about? >> the damage is probably done if you're doing a five to one. what's happened is the stock has gone down. but if the fundamentals aren't going to do any good, it's probably going to go back to one. if the company is doing poorly, it doesn't matter. sell, sell, sell. irving in nevada, irving. >> hello. >> hey, irv. >> caller: hello? >> you got me. it's cramer. go ahead.
4:10am
>> caller: look, i'm irving from las vegas. >> all right. >> caller: and because of you, you've been a wonderful thing that you've been doing for people and for me, i got into the stock market that the more or less at the age of 90. >> fantastic, sir. fantastic. isn't it the greatest? don't you lover it? >> because i've been listening to you for many years, not doing anything, but at the age of 90, i'm 2 now. >> so you're just getting started. you've got a couple of bull markets, maybe a bear market ahead of you. what's up? >> caller: which way is better to buy stock, preferred or common? >> i like the preferreds. a lot of the vmt preferred turned out to be terrific and they're still the best in show. common has more up side. i like to follow the xhop stocks.
4:11am
bigger, better reward but, of course, more risk. but i think you're doing terrifically. tonight i'm sharing all my investing memories and give you the lessons that i have learned. why not get them started really early? keep the kids about investing. it's a lifelong skill. "mad money" will be right back. >> announcer: in his natural habitat on the grounds of villanueva university, the wildcat is the king of the campus. but it's springtime in philadelphia. and now a new species has been introduced into his environment. "mad money"'s back to school tour returns april 25th. don't miss a second of "mad money." follow, @jimcramer on twitter. send jim an e-mail to mad money@cnbc.com or give us a call
4:12am
at 1-800-74 had 3-cnbc. miss something? head to mad money.cnbc.com.
4:13am
4:14am
4:15am
welcome back to a bizarrely "mad money." i have stumbled around the stock market long enough to learn a thing or two. tonight you're getting some of that wisdom from the school of hard knocks. don't you always love it at the beginning of a football game where they say, jim cramer, school of hard knocks? that's what i attended when it came to stocks. you're getting the online version right here, right now. the greatest game, stocks & bonds with its stock certificates and its game board and all the little cool doodads. what would send a stock higher? you keep track. i left the stock market games
4:16am
behind me by the time i got to middle school. my object sessions became sports. i was the second fastest guy in the school forever, so i ran track. and then, of course, girls whose movements were more lucid than even the ranges of stocks. i couldn't win for losing. but that's the sublths of a different show. however, my father did engrain in me the desire to save. early on, i learned that even in high school, as i -- i saved even as i bused tables at the old block & cleaver which we called the block and cleveland because we were hilariously stupid back then and ultimately graduated into selling ice cream. vanilla and chocolate. very quickly, i learned the power of market power. i paid people to give me the exclusive right to sell ice cream, hey, chocolate, on the 600 and 700 level. can you imagine how much money could be made if you had the
4:17am
whole franchise the upper deck? i made a fortune except for the one time they gave me only strawberry ice cream. talk about having to run from a customer after you sold him that stuff. when lefty was on the mound, he pitched so quickly and got players out so fast that i would get stuck with unsold ice cream, which you had to buy from the company before selling it and i would take a real beating. talk about learning how business worked. the shelf life of on ice cream on a hot july night after the ninth inning is about as short as short can be. funny, during the lightning round i midwest jest with you about your name. i'll call you hey, captain or skip or chief. i learned those names at the ballpark. that's what people called me to get my attention to buy ice cream. frankly, i loved it for its bizarre intimacy. i never forgot the intimacy, hey, bud, hey, partner. i opened up an account with fidelity, the magellan fund.
4:18am
@jimcramer on twitter i should be referring you to those all the time. i didn't save for that when i got to college. i went to my tuition, room and board. after i got out of the college, rejected by more than 50 papers, i kept the letters and i'm going after -- i mean, i kept did letters, i landed a position making $156 a week. i still kept a tattered pay stub from those days in my wallet to remind me how hard it was when i got started, how poor i was. nevertheless, i contributed putting a few dollars away when i could. then when i got a horrible job making $179, not long after my sojourn began in los angeles, i found a bungalow apartment in the fairfax district. pretty sketchy, around the corner from pioneer chicken which was way too expensive for me to go to. soon after i was stocked,s at the time i was assigned a story
4:19am
in san diego, a horrible school shooting. when i returned, everything was gone. so it began, my terrible but actually somewhat thrilling six months of living in my car, basically trying to get by. the only up side when you met a woman, it was pretty easy to figure out the end of a night query, your place or mine. now, i know this isn't normal behavior. but i knew my ultimate goal was to save so i could get an apartment. i was living hand to mouth. sometimes people would take me in so i could get a shower and change. but you know what? i never quit saving. i remember cashing my paycheck every other week and writing a check to fidelly magellan fund for what i could afford. how poor was i? yet still putting money away. then i got mononucleosis then jaundice liver, a yellow spot,
4:20am
like a potato projection on my stomach, i had no health care. the company americansly put me on the road. so i had to go to a migrant farm workers' clinic and get fixed up there. i still put money away even as i was making my weekly trips to the migrant farm clinic. i had a doctor that was pretty much one of the best i ever had. giving money to the best stock picker of all time, i managed to add it up 35 years later to save enough money to teach. money amounted to a fund well into the six figures. not because of my capital edition, but because of the power of compounding. an amazing investor at the helm made a ton of money. i never touched it, just let it build. i think the take away here from the distorted chapter of my life is what i would you to do is save no matter what. obviously, the earlier the better through thick and thin.
4:21am
when cnbc has all of those managers on, you don't have enough time or money to handle your own stock portfolio, send the money in as little or as much as you can. if i could still send those checks to the fidelly magellan fund when i was living in my car and saved by a pistol in my sight, the most down and out you can be in this country, you can put away some money, too. stay with cramer. >> jim cramer, you're one of my heros. >> i look forward to your on show every week night. >> thank you so much for helping beginning investors like me. >> when you talked about the markets, i just believe you're spot on. >> oh, i love it. thank you so much. every night we watch you. i have learned and earned.
4:22am
4:23am
[singing] hoveround takes me where i wanna go... where will it send me... one call to hoveround and you'll be singing too! pick up the phone and call hoveround, the premier power chair. hoveround makes it easier than any other power chair. hoveround is more maneuverable to get you through the tightest doors and hallways. more reliable. hoveround employees build your chair, deliver your chair, and will service your chair for as long as you own your chair. most importantly, 9 out of 10 people got their hoveround for little or no cost. call now for your free dvd and information kit. you don't really have to give up living, because you don't have your legs. hoveround replaced the legs.
4:24am
and now every hoveround comes with this handy tote bag and cup holder for access to your favorite items. and right now, get this limited edition hoveround america travel mug free with your hoveround delivery. [singing] hoveround takes me where i wanna go. call or log on to hoveround.com to find out where a hoveround can take you! we're riding the magical money mystery tour. and i'm giving you the life lessons i have learned the hard way through decades of stock investing. i told you first about how to get your kids started early. okay. and then i told you about how nothing should ever stop you from investing if i could invest while living in the back seat of my 1977 ford fairmont. i know you can, too. right now, i want to tell you about how i got started in individual stock picking,
4:25am
something you know i love and still believe. even the you're seemingly in periods of chaos, chicane. it's still totally worthwhile if not lucrative and, yes, it is the reason i believe you watch, that is, unless you love the funny outfits that i occasionally don and the outrageous -- >> buy, buy, buy, buy. >> -- courtesy of when i used to have a radio show called "real money." if you were picking stocks playing with real money, not just with a ledger or with the game stocks & bonds, you need an account. when i got started in 1979. there was no such thing an an online account. i chose to put my individual stock account with fidelity. i didn't know where to put my ideas. i turned to forbes. now, people at forbes, do not take this personally. i read an article about agronomics, a terrific orange grower in florida.
4:26am
and it seemed to be compelling. so i bought ten shares of it for $9. a week later, a frost hit. wiped out the entire crop. my investment was cut in half. i was devastated, but not defeated. i sold it out, took the capital and bought seven shares of bobby brooks which, again, forbes said could be a terrific buy. i ever had never heard of it. almost immediately, they reported a bad quarter and i lost the money i invested again. i was living at a less than swank studio in manhattan, the cheap $400 a month rent, albeit twice the rent for a beautiful one bedroom in tallahassee allowed me to restock my coughers. i was on the road quite a bit back then. after a particularly hard night on the town, so to speak, research ago story in kentucky, i fell in love with a breakfast at bob evans farms. finding out that it was publicly traded and when i went back home, i visited the huge fabulous new york manhattan new york public library, the one with those big lions in front of
4:27am
it, and devoured everything i could about bob evans farms. they had magazines with articles, microfiche of s.e.c. filings. they were four months old, but take it when you can get it. i knew i had a good one. i bought 20 shares. the stock went up immediately on a good quarter and the stock split. and i figured out the first good component of investing, know what you own. like it, even. what did i know about growing oranges? who knew about women's fashion? but a good plate of scrambled eggs and sausages served by an attractive -- well, served in an attractive setting. a company that had a long tradition of service and plans to expand in the midwest? that was for me. next up, old press steel. scooters for plains, something alcoa now dominates. why sps? because a buddy of mine from high school catching up with me told me, listen, jim, if you're in the gym, they're hiring like mad at sps.
4:28am
hiring? great. he said sps is paying good money. i had a job. back to the library, solid income, not much debt. it doubled not long after and i caught the bug for good. 23 years later, sps would be acquired by precision cast parts. the preeminent plight supplier to aircraft around the globe. so now i'm figuring it out. the best investment ideas do not come from these magazines. they come from what you know. when you meld that information with information from public sources, even if they are as late and as hard a source as taking taking a sur surreptitious trip to the new york public library when you're supposed to be working, that's good enough. now, i didn't like the random way i was making money. a friend from home with a lucky call available with jobs available, a hearty breakfast at bob evans farms, there has to be a more methodical way, don't you think? and then it hit me. look around at work. at the time i was covering mergers and acquisitions.
4:29am
profiling some deals that were on, it seemed that every other deal was in the oil patch. one after another, small to mid sized oil companies were waiting to be acquired. i went back to the public library, took out some edition of value lines and checked out the pages devoted to oil companies. i then referenced them with other research, magazine articles to find out which ones would be acquired without problems, either because they were public without a family owning them or because they seemed to fit the same parameters that other deals i was reading about. i set on a deal called natomis. it was an oil company that was a real gusher in indonesia. i didn't have to wait long until mcgee bought them. i almost doubled my money. if i want to buy takeovers, buy companies that would do well on their own but was undermanaged. which was the consensus that i found by reading articles. that meant another oil company with bigger scale could do more with natomis, which was cheaper than it should be if it simply got rid of the management. as much as i had hit some
4:30am
winners, though, i was distraught that i had given up the ghost of those first few trades i mentioned. at the time i had been hanging around the track on weekends, though. mostly aqueduct. i started thinking here. i had learn how to handicap by reading the books by andy buyer. i was addicted to the track. he wrote two books. they may be the second best investment books after peter lidge's books that i mentioned earlier. it teechd discipline, how do i identify the best thoroughbreds to bet on, going out to the tracks where the information was less well known and, please, don't bet willy-nilly on every horse in each race because you're looking for something to do. find the ones with the payoff, bet sure, big, cut your losses if you're having a bad run. think about it, every one of these lessons could be applied to the stock market. you can take a huge swing when you know when you're doing. don't just gamble for the stocks for the excitement identity. most important, be disciplined.
4:31am
don't let your losses pile up. after five years of professional journalism, i decided to hang it up and go back to law school. the good news? i saved enough to pay for my first year all through the stock market. i would i would never have been able to make enough had i just kept it in a saving account. and by the way, let's be clear, an index fund would have made me nothing, nothing at all. if you want to go and get started, go small. invest in what you know. research it intensely. back then, i got old data from the public library. now information is free, ubiquitous. including up to the minute financials, analyst presentations, conference calls that i tell ur are musts if you're going to know what you are doing. simple? no. lucrative? you bet it is. kiann in new york. >> caller: hi, jim-bo. >> yo. >> caller: general question for you. what could be considered a good rate of return on investment and does it differ depending on asset class? >> i think you're measured against bonds.
4:32am
if you can get something, say, twice the risk free rate and get a good tax rate on it, in other words, like you have a reduced tax on the dividends or the capital gains, then you're going to do real well. if you look, the ten year or measure against the 30 years, say 3, 3 1/2, 4, if you can get 6%, 7%, 8%, you are doing great. john in north carolina, john. hey, john. >> caller: hey, what's gone on, jim? >> not much. how about you? >> caller: doing good. so i'm new to the market. >> okay. >> caller: and i've been watching the show and reading the mad money book, which has been very helpful. >> thank you. >> caller: my question is, when i'm doing valuations for companies that i'm interested in and i'm calculating ppgs, which eps number should i use and which growth percentage should i use? is it previous quarter or previous year or is it the estimates for the next quarter or the next year? >> okay. when you're doing the price earnings ratios, i always like to look at the forward, in other words, next year.
4:33am
i don't like to look at historic because that doesn't make it. you have to go and get the estimates. you get them on yahoo!. that's what you use again .that's how you figure out the peg ratio and whether a stock is cheap or not. want to get started? look for things you know and research it until you can't research it any more. you're surrounded now by information. use it. stick around. i've got more or lessons from my investing experience coming right up. stay with cramer.
4:34am
4:35am
4:36am
4:37am
>> tonight's show is all about learning from my attendance at the university of hard knocks. i am taking you through the importance of getting started early and saving no matter what. i am shown you how to stay disciplined. now i'm going to give you a sense of how you can become a trader if you want to. okay? and you want to be a good one. all right? this show has changed from time and time again. it's been years that it's been on. in the last 500 shows, i've deliberate deliberate deliberately moved away from trading and more towards investing. i've done so because there are so many more object tackles to trading than investing. you have to watch your position like a hawk where it's hard to do your job and follow the market. there's so many different products allowing hedge funds to move around stocks like they're
4:38am
toys. you're going one-on-one with the big boys if you attempt to try trading at home. certainly at work. there's some advantages you have now that you sure didn't have when i started trading in my law school dorm back in 1981. first, commissions are so, so much lower so you can get in and out without much friction and with much more after commission profit. second, information is in your personal computer or even your smartphone, third, trading slightly faster. when i was at kraft within i had to use pay phones, no cell. you often had to wait while some kid chatted endlessly and aimlessly to his girlfriend. at the same time, i had to go with what i knew. i knew individual stocks. for all of the stories about harvard law, including the movie paper chase, i can tell you that there was a ton of downtime and a real good business library nearby that had research the brokers turned out as well as
4:39am
upto date microfiche, according to the reports -- that's wa they used to come in -- all things i considered i possessed probably the best publicly information available around back at harvard law. the first thing i decided to do was to work on one trading idea per week. my reasoning was pretty simple. you can't be all over the map if you were doing this as a hobby. even a time intensive one. i figured i couldn't take a lot of chances until i knew what i was doing. a very valuable lesson for you if you want to start trading. i discarded all the of ideas looking for stocks that had catalysts or upcoming mergers. an article on the front page might be talking about a break through in medicine, a new oil find. i got on a roll and that was when i first started writing about the market. i wrote a newsletter which i actually only sent to my papers. i would do no trade if i couldn't explain what the
4:40am
company did and why i liked it and what happened. no buying of anything that didn't have an exit strategy from the moment i put it on. an important lesson made disciplined by a written thesis before i pulled the trigger. when you trade, trade with confidence. let mu me ask you, you could easily be shaken up by the broader market if you aren't. you want to trade with confidence? ask yourself, would you be willing to put a stock recommendation on your voice mail, on your answering machine and update it every week? hi, this is jim cramer. i'm not here right now but i like monotu for the next week. el, i actually did that. i was putting my money where my mouth was and managed to get augment the winnings with work i was able to get from my old employer and some legal work from a professor who moonlighted on cases. it wasn't long after that that
4:41am
marty pair yot tried to get me to write a piece. of course, i neglected to call him back. so he inadvertently got three weeks of trades of the week and they were all successful. he told me to meet him at a coffee house nearby. when i did, he wanted to give me $500,000 to manage. i said i didn't think i was capable of handling anywhere near that amount. he said he had confidence in me. shortly after, he gave me a check for $500,000. which by the way was real money back then. i ran down to fidelity and set up another account, went right to work trading. almost immediately i lost a ton of it. i could see how i was i would have to wash dishes and mow the lawn at marty's house to blow away the money i brew away in three days. my mistake? a man has to know his own limitations. you see, you can't trade a huge chunk of money at once. it was a total violation of all my discipline. you can't put it to work at all once. you can't put it all to work at once. knowing that you'd be done,
4:42am
whether at work or not, i violated my own rules and i had blown it. i confessed to marty my sins and said he should take the money back. instead, he wanted to give me mo more money. i reverted to my old style, going big when i had the biggest conviction. i slowly by surely made it back while also paper invested a more active and is not truly trading portfolio. that would become the beginning of my actual professional trading career and i ended up making a lot more money than anybody ever thought you could. here is the bottom line. if you're going to trade, make sure you have a catalyst, an exit point where there's something that's supposed to happen and you are out of the stock either way because you are trading, not investing. you need conviction and you have to ask yourself, would you be willing for the world to hear hi, it's me, it's not here right now, but i want you to take a swing at disney ahead of the big analyst meeting? if you can do all those things, start small, give it a try. stay with cramer.
4:43am
>> cheeseburger, medium rare. >> so close, you can almost taste it. mad money's back to school tour returns april 25th.
4:44am
4:45am
4:46am
i'm taking through the importance of starting investing early. the need to stick with putting away money no matter what. the imperative of knowing what you own and the discipline of what it means to be a good trader. now we're up to the professional grade, my time when i started at goldman sachs. i had been courted by goldman sachs for three years before i got a job this the security sales department. helping individuals and small institutions manage their money. but tonight's show, like every show, is about learning how to trade and invest. my study with me at the university of hard knocks. so i will dispense with the anecdotes.
4:47am
trying try to teach you how to make money from the events that occurred when i was at goldman. first, that's where i began understanding the process of actually making money. money management, the ability to build a portfolio trt ground up. i had the best teachers in the world. lee cooperman put on a new investment clinic each day. hardly an hour went by when i heard a great new idea walking down the hall. but you know who i really learned from? my customers. chiefly wealthy individuals from all walks of life. it was at goldman that i learned something that these days can't be understood by so many professionals at this business. that is individuals actively beat the market regularly. i can tell you i saw it with my own eyes. i had nondiscretionary accounts, meaning i wasn't allowed to invest anyone else's money with my own ideas unless i could win them over to make the purchase. remember, i was on commission and made moenl money only with the buys or sells i could convince people to act on. that's where i learned how
4:48am
important it was to with the individual. i was able to articulate that stock's idea in a way that made sense. you had to know your stuff. i often asked the buyers whether they knew enough about their stocks when they wanted to buy on their own. i wanted them to be as educated as possible about the securities they were buying. you know what? it's because i knew that stocks go down. and i knew that if they went up, it would be their idea. and if the stocks went down, they would be mine. just human nature. what else did i learn? how about humility? it was at goldman sachs that i first figured out how humbling the business could be. a great bull market had just started a year and a half before i was hired. almost all stocks have tremendous tailwinds. but when one of your ideas went against you, you had to get on the horn and explain either why the person should buy more or whether they had to cut their losses, kind of like what we hear in the lightning round every night, isn't it? that's why we always have to recognize how fallible investments could be and what to do when stocks go against you. i also learned to let your gains run while you could cut your
4:49am
losses and when to cut those losses. i learned the hard way. most of my clients were business people who didn't know a lot about stocks. they had been entrepreneurs, inventors, that kind of thing. i had a real cantankerous client. a real estate tycoon. still scares me to think of him. i had to work hard to get the guy, try to win him over for ages. i told him i would be judicious. he said he didn't want trade. he only, only, only wanted long-term investments. at the time, i liked kimberly clark, the paper company, one which i have liked forever. still do. i told him i thought this would be a great investment. he agreed. almost immediately it went up eight points. i had a winner. so i called him and i said, bob, incident to ring the register and sell the 1,000 shares of kimberly clark. i thought he'd thank me. but he was furious. he told me i said kimberly clark was great for the long-term. they would have great gains over time and he wasn't the least bit
4:50am
interested in only making $1,000. then he questioned my integrity, wanted to know if i was trying to churn him, a horrible charge meaning i was just trying to generate commissions off the guy. you know what? i was scorched. but he did treat me a great lesson. if you don't want to turn a trade into an investment because that's usually a sign that use basing a loss and trying to cement why you're in it. you don't want to turn an investment into a trade. if you have a good one, let it run for heaven's sakes. bob was right. kimberly ultimately doubled and i was vindicated, despite myself. understanding how to create long-term welt, a lot of my business involved contacting the people who had just come into a great deal of cash, either through inheritance or through business. they tend to be rather unsophisticated about the cash management. i regarded my first job as listening to their needs, trying to figure out what they wanted. they were conservative? well, okay. did they want capital preservation? were they aggressive? did they want capital appreciation? i tried to get to know them and urge them to try to get to know themselves and the risk levels of tolerance.
4:51am
just as you should know yourself. can you handle the pain of a market decline? how about dividends? do you want to participate in new issues? do you want to try to hit it out of the park with your capital? of course, many of you are familiar with these lessons. you've heard me say them on many a night. i'll try to teach you what to know yourself. when i first got to goldman sachs, the oil, the oil sector, the patch, these stocks were hot as a pistol. you have to understand those were different days. they struck out oil. we could find out how big the finds were. they were places in this country, in this continent that had not discovered oil yet. you could have them double and double again in very different times. the families wanted oils, i wanted oils. every day seemed like a great day in the oil patch. services, drillers, you name it. some global tensions had jacked up the price. the next thing you know, the
4:52am
bull morphed into a bear. i had understood first hand the contest of diversification. while i occasionally violated the rules on this show, i never again intentionally avoid diversification. here is the bottom line. i learned the core principles of investing, finding solid ideas to create long-term wealth in a way that benefits the customer. consider yourself the customer of this show. all of my investors consistently beat the market on ways of their own aided by people like me who worked with them to consciously put a plan into action. "mad money" is back after the break. take considering control of your financial destiny is smart, but why would you go it alone? >> something that has a much larger bearing on you and the stock market as a whole. >> let cramer be your guide, your sounding board. >> i'm having a hard time with my favorite stock. >> i know you can beat these professionals. >> and your coach on the road to financial independence. "mad money" week night owes cnbc.
4:53am
4:54am
4:55am
4:56am
our tour of the early lessons of my life's journey into the market is drawing to an end. you followed my love affair with stocks as a boy, saw the importance of getting started early in investing. you lived with me with my .22 caliber pistol in the back of the car. saw me invested in mutual fund no matter what the circumstances to understand the need for me to save no matter what. you learned how to find the good ideas, how to research them and find them cold. you saw is discipline needed for good home gamer trading and you stumbled along with me to find the goodness of long-term investing. i hope you've been able to take away a ton of new information from this old guy, been able to glean some insights from my mistakes and swear to me that you'll never mistake them. best of all, i want to wish you success in trading and investing and to remind you when you hear from the gray beards that say you can't make money at home and have to give the money to a professional or index fund, that the story of my life at every turn is very much the opposite,
4:57am
and that you can make money in many different ways with managers, with brokers and, yes, by yourself. stick with cramer. you're not going to want to share, either. "mad money"'s back to school tour returns april 25th.
4:58am
4:59am
[singing] hoveround takes me where i wanna go... where will it send me... one call to hoveround and you'll be singing too! pick up the phone and call hoveround, the premier power chair. hoveround makes it easier than any other power chair. hoveround is more maneuverable to get you through the tightest doors and hallways. more reliable. hoveround employees build your chair, deliver your chair, and will service your chair for as long as you own your chair. most importantly, 9 out of 10 people got their hoveround for little or no cost. call now for your free dvd and information kit. you don't really have to give up living, because you don't have your legs. hoveround replaced the legs. and now every hoveround comes with this handy tote bag and cup holder for access to your favorite items. and right now, get this limited edition hoveround america travel mug free with your hoveround delivery. [singing] hoveround takes me where i wanna go. call or log on to hoveround.com to find out where a hoveround can take you!